A company that provides services of personal import of luxury vehicles has filed false statements to the tax authority regarding the value of the imported vehicles. Customers who were required to pay the tax differentials of hundreds of thousands of shekels demanded that the shareholders of the company be personally liable.
The Court accepted the claim and held that the company breached the agreement and the shareholders are personally liable by virtue of piercing the corporate veil as the company was used to defraud. Israeli law allows a company debt to be attributed to a shareholder in exceptional circumstances where the legal entity is used to defraud. The company specializes in personal import of luxury vehicles and customers are required to pay a total and final amount for the import which also includes a commission for the service. The company breached the agreement with its customers by declaring to the tax authority a lower value than the real value of the imported vehicles. Shareholders may not look the other way and need ensure that illegal actions are not taken, such as a false statement to the tax authorities regarding the value of the imported vehicles. As this is not just a mere breach of contract at the contractual level but also fraudulent acts and fraudulent presentation, there is justification for piercing the corporate veil and holding the shareholders of the company personally accountable for the full tax differentials that customers were required to pay in the amount of hundreds of thousands of shekels.